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Aberdeen to manage AIIB’s US$500 million Asia ESG bond portfolio

The China-led Asian Infrastructure Investment Bank (AIIB) has formally appointed Aberdeen Standard Investments to manage its US$500 million socially responsible Asia bond portfolio, seven months after awarding the contract.

The Scottish asset manager will be responsible for investing AIIB’s Asia environment, social and governance (ESG) enhanced credit portfolio, they say in a joint statement on July 12.

The portfolio will consist primarily of Asian infrastructure related bonds, including green debt, and those that are not specifically labelled green but have ESG factors fully integrated in the investment process. It will be managed by the asset manager’s fixed income team in Singapore.

According to an AIIB spokesperson, this is the first time the multilateral lender has outsourced the management of ESG bonds.

A Hong Kong-based fund analyst says green bonds have become one of the most popular ways to raise funds for infrastructure projects in Asia.

“It makes senses for international organisations like AIIB to rely on external managers for ESG bonds investing as the managers have comprehensive capabilities in research, screening and assessment for the bonds,” the analyst tells Asia Asset Management, speaking on condition of anonymity.

Aberdeen Standard Investments has also formed a strategic partnership with AIIB to work together to launch a sustainable capital markets initiative. This plan is aimed at improving ESG standards and building capacity around responsible investing with market participants such as bond issuers and rating agencies.

“We believe that institutional investors are a key part of the solution to finance Asia’s infrastructure needs over the coming decades,” AIIB Vice President and Chief Investment Officer D.J. Pandian says in the statement. “Integrating ESG standards into capital markets in emerging Asia will be important to achieving long-term sustainable development goals.”

Douglas Flint, chairman of Aberdeen Standard Investments, adds that the need for more infrastructure investment in Asia “offers a real opportunity to embed ESG principles, while countries and communities accrue the long-term social and economic value that comes from the asset classes”.

Edinburgh-based Aberdeen Standard Investments had $676.8 billion of total assets under management as of March 2019.

Beijing-headquartered AIIB, which was established in January 2016 to support infrastructure building in Asia Pacific, had $19.5 billion of assets at the end of 2018.